Once comprised of a small group of products sold to only the largest businesses, the talent management software market has grown into a $12 billion industry that doesn't show any signs of slowing down.
Companies big and small have a wealth of talent management software products to choose from to handle a variety of HR needs. But with this wealth of choice comes a significant challenge for first-time buyers: Without prior knowledge, they can easily overpay, end up with a system that's a poor fit, or have unrealistic expectations for outcomes after implementation.
Knowing how other talent management software users searched for and purchased their systems can help improve the odds of a successful system purchase and implementation at your business.
That's why we surveyed 350 talent management software users to find out who they are, how they found and purchased their talent management system, how they use it, and what results they've seen from this investment.
Looking at factors such as industry and company size, we find that talent management software users come from a wide variety of businesses.
Our results indicate that talent management users do not predominantly come from any one industry. While IT services companies are the most common businesses in our sample, they still represent a mere 10% of the total.
This makes sense, given the fact that, until robots take over, every industry needs people to support and grow their organization. Talent management is a ubiquitous need regardless of what the company actually does. That being said, there are some insights we can gain from these findings.
Healthcare, education, and banking/financial organizations closely follow IT service businesses as common talent management software users, which is no coincidence. These are some of the most heavily-regulated industries in the U.S., where HR departments have to carefully track required certifications and follow strict protocols related to hiring and termination.
If you're in one of these heavily-regulated industries, talent management software is critical for both HR process efficiency and staying on top of rigid compliance needs.
Looking at business size, we find a similar trend: Talent management software users run the gamut from tiny startups with less than $1 million in annual revenue, all the way up to $1 billion, 5,000+ employee enterprises.
Just ten years ago, these charts would've been heavily skewed towards big businesses. As the enterprise market became saturated, though, talent management software vendors began to go downstream to create and cater products toward smaller and smaller buyers, with a focus on affordability and ease of use.
So, if you're a small business that is “waiting” to be big enough for software, that's not necessary anymore. There are now tons of talent management systems out there for your unique budget and needs.
Talent management software buyers don't always start their search from the same place. And, for some, choosing the right system can take longer than expected.
Before they purchased their current talent management software, how did businesses handle their HR needs? We find that talent management software users can be divided into three distinct groups:
Each group has their own factors to consider when searching for new software. The manual methods group has to digitize their employee data just to be able to adopt a product. The repeat buyers have to take steps to ensure they don't end up with another system they need to replace soon. And the non-HR software group has to learn the ins-and-outs of an entirely new technology market.
This is an important consideration for talent management software buyers. You want a system that not only fits your needs now, but will also handle your needs years from now. But you also don't want to end up with a system that's costing you a lot of money while you're only using half of the features. It's a careful balancing act.
What is surprising is that price has surpassed ease of use as the second most-cited top factor, compared to our 2016 report. Blame increased cost-consciousness, or the fact that more budget-strapped small businesses are purchasing talent management software than ever, but it's clear that the final price tag is weighing heavily on purchase decisions.
You owe it to your business to do the same. A demo not only gives you an opportunity to see a talent management software system in action to discover how user-friendly it is, but it also gives you a chance to ask important questions about implementation, user training, customer support, and even additional costs that might not be visible on the vendor's website.
A demo will also help you make the final decision between two similar products.
Ultimately, how did the talent management software search match expectations?
For 60% of users, the search for talent management software was relatively painless, taking six months or less to complete from initial research to final purchase. For others, it was much worse. Despite only 18% of users expecting their software search to last 10 months or more, that's exactly what happened for nearly half of our survey respondents (45%).
If you make your software search a priority, separate your feature needs from your feature wants, avoid scope creep (where stakeholders pile on extra requirements for your software over time), and actually sit in on demos, you can easily find the right system in six months or less.
On the other hand, if you keep pushing this process to the side, or go in with unreasonable expectations related to functionality, cost, or otherwise, the search duration will zoom way past what you intended. Once you've decided as an organization to purchase new talent management software, commit and do the work to find a system that fits your needs quickly.
Some talent management software buyers find that the final cost and the implementation period itself don't always match expectations.
Did talent management software users end up paying what they expected to at the start of their search? Not always. In fact, there was almost an even split among our respondents: For 60%, the cost was what they expected, and for 40%, it was not.
Interestingly, for those 40%, there was another split. 45% spent more than what they expected, while another 45% spent less than what they expected (10% said they were not sure about either expected or actual spend).
Talent management software vendors have a history of making their pricing difficult to find online or refusing to publish it at all, either in hopes of getting a potential buyer on the phone, or because the cost of their software varies so wildly from company to company. This can make it incredibly difficult to set a talent management software budget during your search.
To help, here is how average talent management software cost broke down by business size in our sample:
|Number of Employees||Average Annual Software Cost|
|1 - 50 employees (n = 29)||$8,328|
|51 - 100 employees (n = 38)||$12,316|
|101 - 250 employees (n = 36)||$18,722|
|251 - 500 employees (n = 62)||$19,887|
|501 - 1,000 employees (n = 44)||$17,568|
|1,001 - 2,500 employees (n = 25)||$30,520|
|2,501 - 5,000 employees (n = 34)||$34,941|
|More than 5,000 employees (n = 38)||$31,263|
To learn more about prices of specific talent management systems, check out our talent management software pricing guide.
When it comes to deployment model, roughly three-quarters of our respondents opted for a web-based or cloud-based solution, as opposed to an on-premise system.
This is hardly a trend in just talent management—cloud-based deployments have become more and more common across business technology. Gartner predicts the number of cloud-managed service providers will triple by 2020.
For small businesses that might lack the IT personnel or hardware to support an on-premise deployment, this is a good thing. But buyers should still understand some of the limitations with cloud-based deployments—e.g., a lack of customization, limited control over back-end infrastructure—before deciding on this model.
Don't knock the cloud over concerns that it's less secure than on-premise systems though. That's a myth.
When it comes to the duration of the deployment period, we again see some mismatch between expectation and reality. While 56% of respondents had the same deployment duration as they expected at the start of their search, 44% did not. Of those 44%, 56% had a longer implementation period than expected, while 40% had a shorter period than expected (4% didn't know either their actual or expected deployment period).
To avoid having your software deployment take longer than expected, talk to your vendor to come up with a detailed implementation plan that considers not only technical hurdles such as setup, system integration, and data migration, but human hurdles as well. User training and change management can often be the biggest time-sucks in software implementation.
Talent management software is predominantly used to manage core administrative needs. Yet when it comes to 360-degree feedback and succession planning, one user's trash is another one's treasure.
Once businesses get their talent management software implemented, they most often use it for core HR needs such as personnel tracking, time and attendance, payroll, and recruiting. Given that HR personnel can spend as much as three-fourths of their time on administrative tasks like these, it makes sense that they would want software to automate as much of this work as possible so they can focus more time and energy on strategy.
During your software search, you'll find that you can categorize talent management software into four distinct buckets when it comes to functionality:
Depending on which systems you already have in place, you may opt to buy a few standalone tools to integrate with your existing software or go for a more robust suite that has everything you need in one package. Be forewarned though: More functionality tends to correlate with more cost.
360-degree feedback and succession planning are both the most ignored talent management software features by those who have them, and the most desired by those who don't.
If you're concerned that your performance review process is unengaging or lacks good data to support employee ratings, 360-degree feedback software is vital. These tools make it easy to gather insight from coworkers and other department heads that work closely with your employees to flesh out a more holistic view of how well they're actually performing.
With 85% of executives reporting they lack confidence in their leadership pipelines, investing in software to support succession planning is becoming more and more of a priority for businesses. Using these systems, managers can keep tabs on the promising future leaders among their ranks and identify the skills they need to develop to eventually become higher-ups in the organization.
A majority of talent management users are satisfied with their purchase, and also feel that their purchase has lowered the amount of time and money they spend on HR administration and recruiting.
Overall, we found that 83% of talent management software users have had their system for at least one year, and 43% have had their system for at least two. No one has had their system for more than a decade.
This indicates a fairly strong attachment rate for talent management software users over time once they've decided on a system and completed their implementation. Still, it's important to audit your software every year during budget season to determine if the system is still worth the expense.
At the end of the day, are talent management users satisfied with their purchase? More than 80% of the time, the answer is yes. Only 8% say they are unsatisfied with their purchase, with a majority (58%) of this admittedly small sample size citing missing features as the reason why.
This indicates that if prospective talent management software buyers can identify all of their feature needs for today, and predict with a degree of certainty what features they'll likely scale to and use tomorrow, there's a high chance they'll be happy with their system for the foreseeable future.
Examining more closely, it's clear that a majority of talent management software users are satisfied with their system because of its positive impact on common HR goals, including lowering time and money spent on HR administration and recruiting, and improving employee engagement.
Which brings us to an important final piece of advice with any talent management software purchase: You need to define goals. Decide which key performance indicators (KPI) you hypothesize will be improved by your software purchase, and then measure if those KPIs actually improve after software implementation.
The talent management software market is booming, and if you look at our survey results, it's not hard to understand why. Businesses of all sizes and from all types of industries are increasingly relying on this technology to both automate and optimize important HR processes, and achieving positive results related to money and time saved.
That being said, there are a few bumps in the road on this journey. Budget-strapped buyers are increasingly factoring the final cost of software in their purchase decision, and many are failing to accurately estimate how long it takes to find and implement the right system.
The underlying lesson here? Don't take on this monumental task alone. At Capterra, we have a number of resources to help you research the hundreds of talent management software systems out there to hone in on the exact right one for your needs. Click on one of the links below to get started: